The early stages of respiratory system development including branching morphogenesis and cell lineage commitment have been studied extensively and this has led to a dramatic increase in our understanding of how the trachea and lungs are specified and how endodermal lineages commit to different epithelial cell fates. However, less is known about the late stages of development and maturation, which are required to form the air-vascular interface important for gas exchange in the postnatal lung. These later steps of lung development involve dramatic changes in cellular differentiation and morphology, resulting in the dilation and expansion of the distal saccules and eventual septation of these saccules into alveoli to increase surface area for efficient gas exchange. The importance of these steps is highlighted by defects in these morphological processes resulting in poorly understood syndromes including bronchopulmonary dysplasia, which can lead to severe neonatal distress or death. Despite the importance of lung sacculation and alveologenesis, the molecular pathways involved and the cellular remodeling that is required for these steps remains poorly understood. We have previously shown that the class I histone deacetylases 1 and 2 (HDAC1 and -2) are essential for development of the proximal Sox2+ lung endoderm progenitors, resulting in the loss of proximal airway epithelial differentiation. We now show that the class I HDAC, HDAC3, regulates late lung epithelial maturation and cellular remodeling essential for sacculation and early alveologenesis. Our preliminary data suggest that HDAC3 regulates sacculation and early alveologenesis through repression of a miRNA program including the miR17-92 cluster. De- repression of miR17-92 in HDAC3 deficient lung epithelium leads to inhibition of Tgf-? signaling as miR17-92 targets multiple components of the Tgf-? pathway including Tgf-?2, Tgf-?R1, Tgf-?R2. The resultant decrease in Tgf-? signaling activity leads to a failure of AT1 cells to spread and remodel, causing a lack of saccule/alveolar airspace expansion and neonatal death. Interestingly, these defects are not associated with an observed change in AT1 cell specification or commitment. Preliminary data also shows that HDAC3 regulates the alveolar epithelial response to injury in the adult lung. These findings will have a broad impact on our understanding of the epigenetic mechanisms and cellular remodeling required for proper late lung development as well as postnatal repair and regeneration.